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Economic Shocks And Exchange Rate As A Shock Absorber In Indonesia And Thailand

  • Siwei Goo
  • Reza Siregar

This study investigates the requirement for the exchange rate to be a shock absorber in Indonesia and Thailand from 1986 to 2007. In general, we find that the economic shocks have predominantly been asymmetric relative to the US and the Japanese economies. Yet, the weights attached to the US dollar remain respectably high in the exchange rate management of the rupiah and the baht, in particular for the latter currency, during the post-1997 crisis. Hence, relinquishing the role of the exchange rate as a shock absorber has been costly during both the pre-and the post-1997 crisis periods for these Southeast Asian countries. Furthermore, it is arguably more costly for Thailand during the post-1997, and for Indonesia during the pre-1997 crisis.

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This book is provided by South East Asian Central Banks (SEACEN) Research and Training Centre in its series Staff Papers with number sp72 and published in 2009.
ISBN: 983-9478-77-X
Handle: RePEc:sea:spaper:sp72
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  2. Rahmatsyah, Teuku & Rajaguru, Gulasekaran & Siregar, Reza Y., 2002. "Exchange-rate volatility, trade and "fixing for life" in Thailand," Japan and the World Economy, Elsevier, vol. 14(4), pages 445-470, December.
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  11. Michael Artis & Michael Ehrmann, 2000. "The Exchange Rate -a Shock-Absorber or Source of Shocks? A Study of Four Open Economies," EUI-RSCAS Working Papers 38, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  12. Devereux, Michael B., 2004. "Should the exchange rate be a shock absorber?," Journal of International Economics, Elsevier, vol. 62(2), pages 359-377, March.
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  17. Charles WYPLOSZ, 2001. "How Risky Is Financial Liberalization In The Developing Countries?," G-24 Discussion Papers 14, United Nations Conference on Trade and Development.
  18. Lastrapes, William D, 1992. "Sources of Fluctuations in Real and Nominal Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 530-39, August.
  19. Ilan GOLDFAJN & Gino OLIVARES, 2001. "Can Flexible Exchange Rates Still “Work” In Financially Open Economies?," G-24 Discussion Papers 8, United Nations Conference on Trade and Development.
  20. Ben S.C. Fung, 2002. "A VAR analysis of the effects of monetary policy in East Asia," BIS Working Papers 119, Bank for International Settlements.
  21. Alun H. Thomas, 1997. "Is the Exchange Rate a Shock Absorber? the Case of Sweden," IMF Working Papers 97/176, International Monetary Fund.
  22. Gali, Jordi, 1992. "How Well Does the IS-LM Model Fit Postwar U.S. Data," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 709-38, May.
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